Wed, Dec 7, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Asia Pacific Intelligence

QDLP scheme for hedge funds kicks off with $5bn quota application in mainland China

Tuesday, April 09, 2013

(This piece first appeared in Opalesque's AMB)

The South China Morning Post reported that foreign hedge funds are going to be allowed to raise yuan capital from mainland China investors which can then be invested in overseas securities.

The piece explains that the QDLP scheme, designed for foreign hedge funds, complements the qualified foreign limited partner system Shanghai launched in 2011. "Shanghai has started the countdown to the introduction of a "qualified domestic limited partner" (QDLP) scheme, which will allow foreign hedge funds to raise yuan capital on the mainland to make investments in overseas securities".

The city has submitted an application to the country's foreign exchange regulator for a $5bn quota, which may then be distributed to funds wishing to participate in the scheme.

The paper writes that Shanghai's move comes as it faces competition from Qianhai, an experimental financial zone in Shenzhen that is being used as a testing ground for freer yuan usage and capital account convertibility. "Government officials said the application for the investment quota was in the final stage of preparatory work for the launch of the scheme, although a launch date had yet to be decided."

An official with the Pudong Financial Services Bureau said in the SCMP piece: "The QDLP programme will be launched sooner rather than later. The city officials are very active in pushing ahead with major liberalisation, including the QDLP."

Under the QDLP scheme, qualifying foreign hedge funds must be registered with the local authorities before they can convert yuan funds that they will be allowed to raise from mainland high net worth individuals into foreign currencies for securities investments abroad.

The scheme, initially proposed by the Shanghai government, is intended to bolster the growth of the domestic hedge fund sector.

Hedge funds that raise capital privately are still in a rudimentary stage on the mainland, and cash-rich Chinese investors have little knowledge about the operations of the sector.

The paper writes that the city has made no secret of its ambition to transform itself into a global financial centre, but it is facing competition from Qianhai, an otherwise backwater area in Shenzhen which has risen to prominence since Beijing gave it approval last year for a trial of bold financial reforms.

"Bankers and fund managers said Qianhai was more efficient than Shanghai in approving the establishment of new funds and loosening regulations on cross-border capital flow between Shenzhen and Hong Kong.

Senior Shanghai city officials, including the executive vice-mayor, Tu Guangshao, a former vice-chairman of the China Securities Regulatory Commission, are now actively backing more liberalisation of the financial markets to allow freer cross-border capital flows."

The yuan is still not fully convertible under the nation's capital account. Foreign institutions may only buy mainland stocks through the qualified foreign institutional investor programme, while mainland investors may buy into qualified domestic institutional investor products offered by mainland mutual funds and banks to gain indirect access to overseas markets.

The QDLP scheme, designed for foreign hedge funds, complements the qualified foreign limited partner system Shanghai launched in 2011.

Sources said Shanghai might now get a $3bn initial quota for the QDLP scheme, rather than the $5bn it had bid for in its discussions with the State Administration of Foreign Exchange.

However, the paper quotes HowHow Zhang, the chief researcher at Z-Ben Advisors in Shanghai, who said: "It doesn't look as if foreign hedge funds would find it easy to raise capital domestically, since mainlanders are still not very interested in their products."

Asia Pacific Intelligence reported on hedge funds and their move into China in its October issue. You can read that piece here and a piece on the $5bn trial here.

November saw a piece about Shanghai's Fortune Group's product based on Winton Capital's trading programme. You can read that piece here.

 
This article was published in Opalesque's Asia Pacific Intelligence our monthly research update on alternative investments in the Asia-Pacific region.
Asia Pacific Intelligence
Asia Pacific Intelligence
Asia Pacific Intelligence
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. M&A - AllianzGI to acquire Sound Harbor Partners, SS&C completes acquisition of Wells Fargo's Global Fund Services business[more]

    AllianzGI to acquire Sound Harbor Partners Allianz Global Investors (AllianzGI), an active investment manager, announced that Sound Harbor Partners, a US private credit manager led by Michael Zupon and Dean Criares, have agreed to join its fast-growing Private Debt Platform. Under the te

  2. Hunt for yield pushes more investors into riskier assets[more]

    From FT.com: Pension funds and insurance companies have increasingly embraced riskier assets in their hunt for higher returns over the past five years. Alternative assets such as property, infrastructure, private equity and hedge funds have been bought up by institutional investors in a world where

  3. People - Nectar Financial hires senior investment team, Texas A&M replaces retiring foundation investment chief, Ex-Cadwalader partner Woolery makes another sudden exit, How to become a Python coder at a top hedge fund, by the co-CTO of Man AHL[more]

    Nectar Financial hires senior investment team Nectar Financial AG, a Swiss financial technology company for wealth and asset management, has announced that it has hired two key senior leaders to spearhead its digital asset management efforts. The company also announced that it has entere

  4. Activist News - Cognizant has introductory discussion with activist investor Elliott; to review letter, Starboard Value makes huge investment in Hewlett Packard, Hedge fund calls for removal of First NBC Bank CEO[more]

    Cognizant has introductory discussion with activist investor Elliott; to review letter From Indiatimes.com: Cognizant said it had an introductory discussion with Elliott Management after receiving the activist hedge fund's letter asking for a board shakeup, a buyback, a dividend and chan

  5. Opalesque Exclusive: Ireland relaxes treatment of direct lending funds[more]

    Bailey McCann, Opalesque New York: The Irish Central Bank has relaxed its treatment of direct lending funds, according to a recently released